tv Bloomberg Markets European Close Bloomberg June 16, 2016 11:00am-12:01pm EDT
live from london, you are watching the european close on bloomberg markets. vonnie: we are going to take you from new york to london to st. petersburg in the next hour. for central banks meeting today siding tod, all the keep from changes to monetary poli. will the safe approach work westmark investors are rushing into safe havens. gold is up to its highest level in nearly two years and the bond rally continues with yields around the world hitting fresh lows. and breaking news out of the united kingdom -- the labour is attacked cox while meeting constituents.
campaigning for both sides of the brexit vote is now suspended. mark: let's have a look at european equities and trading right now. concerns are heightened today in a number of central bank policy meetings in the last 24 hours. janet yellen referred to brexit, the minutes of the bank of england meeting referred to brexit, the swiss banking national governor referred to brexit. investors are taking it on board . european stocks are falling for the six days in seven. the global macro movers -- this is the column that i want you to focus on. norway, 2.5% lower and denmark down by 2%. valuellion euros worth of
whoosh. a big day for volkswagen for a number of reasons. it has mapped out its new strategy, focusing on electric cars, automated driving, and services like ride sharing it wants to get over the omissions scandal. week to hammer out an accord with the u.s. government. shares are down by 28%. much, much lower after the crisis broke. a big day for banks today, a number of players hitting all time lows. deutsche bank is among them. to 12.7e target cut euros. worsening investment bank
revenue, just getting back to interest rates, no change in negative interest rates today. the is the euro against smb. then, it rising and since the euro has been strengthening, except for the last month where the swiss franc has hit its highest level this year. the big question is what will the smb do if brexit materializes next thursday? minutes into the trading day, let's get to the markets desk. how is it looking there? not looking great if you are able in these markets. the nasdaq is the worst of the three, down 1%. whisk -- aat has a whisk of being economic
sensitive. the s&p 500, if you focus there and what we have seen over the past six sessions, down by about have seen this latest selloff, the longest losing streak going back to last august when we had the enormous market selloff. we are not down to the lows of where we weren't there or even the february lows, but the selloff is notable for its duration. higher.s and telecoms they tend to move inversely with interest rates, which are going down. energy shares down more than 1%. financials and tech rounding out some of those worst performers. individually, those weighing the jpt include apple with morgan cutting their outlook. theetting getting caught in downdraft and out for that down
as well. we see many rental truck stocks adding hit today. rbc pointing to a report from ralph talking about rental rates over the past month and that basically, demand is declining of demand is declining as supply or capacity is increasing. rates --o talk about the 10 year yield falling to its lowest going all the way back to 2012. here you see that chart from that time, not a record low but lowl, a notable, historic as we have seen this bond yields decline around the globe market. you said it. record low yields here. this was 30 year has gone negative. let's check in with bloomberg's first word news.
ofa british member parliament has been shot and critically wounded. the leg -- the labour party is meeting with constituents when she was shot twice. a suspect has been arrested. witnesses told the bbc he had a hand main gun. campaigning has been suspended on the referendum. recovered theve cockpit voice recorder from the plane that crashed in the mediterranean. egyptian officials say the device is damage but the memory unit is intact. the data recorder still has not .een found investigators hope the black boxes can tell them why the plane crash. the white house says it is likely to be an emotional trip when president obama flies to orlando today. president will comfort survivors of the massacre and thank emergency workers. reshape thecould presidential race. president obama has been pushing for gun control, gay rights,
greater acceptance of muslim americans. talked for 15 hours on the floor of the senate. they say republican leaders have agreed to hold new votes on new gut limits. measures include expanded background checks and banning suspect terrorists from buying guns. today, philadelphia is likely to become the first major city to approve a tax on soft drinks. to city council is expected approve a tax on drinks containing added sugar or artificial sweeteners. earmarkedollars are for prekindergarten recreation centers. the beverage industry calls the tax unfair. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. thank you. just one week before the u.k.
votes on the brexit. the monetary policy committee has set uncertainty is already having an impact. decided to keep the key interest rate at a record low 50 basis points today. the pound has dropped on the news and is down almost 1%. mark: our next guest says central banks are looking increasingly helpless and the economic invite men -- economic environment is more important. doubling down is what they did today in its minutes. ,hey have been criticized talking about the risks of a brexit. he says he is justified and it's not his personal opinion. with theel sympathy boe? we do. we can't wait for the vote. for the financial crisis, one of the criticisms was they were not
looking enough at the risks in the economy. it is bonkers to think they should ignore it. it is risk and the bank, with all due respect, looks at the risk around this event and the likely to come from it. so to ignore it would be an even worse crime, but it is inevitable that it gets politicized and i think some of the accusations are just crazy. just sit there and ignore it. they have to look at the event impacting not only the u.k.. vonnie: there is a trade there -- mark: there is a trade there because sterling could fall and that pushes up in poor prices. is a balancing act. how would you expect the bank of england to respond beyond providing liquidity to the bank?
that balancing act was highlighted in the minutes and that point in time, one has to take the view that the risks to the economy are more important than any transitory push higher that comes from the exchange rate. the last point i would say on that is the government would probably switch from saying nothing is going to change and then not talking up the economy, but downplaying the risk and pushing out the timeframe that it would take. if we get a clear result and the answer is britain is staying and the european union, than see a sharp reversal what we have seen in the last four or five weeks? will, not onlywe that but what we've seen on the swiss franc and the yen, sharply
reversed, and initial move up to 148. quite as much a percentage move on the swiss franc. reaction is the ground will be changed, not as much as would have happened with a brexit scenario, but the political ground has changed and that will be the next thing we look at and the degree to which the data shows, we see what extent it is people putting off the decisions and what is the more structural slowdown in the economy? vonnie: that would help out the bank of japan in the swiss national bank which is worried about having to intervene. they had to look and see what is the outcome going to be next week? for the bank of japan, that's the most pivotal.
they would see quite a decent reversal in the yen and for the bank of japan, it's pivotal and will influence their policy decision. you have given us a few pinpoints there. what have you uncovered? look from friday onwards, it was just one way traffic on risk assets. that's why even the reaction we see initially on the end won't be that far behind what we see on sterling, which is just the way things have spread. no one wants to buy risk at this point and that's why you see it all across these markets and gold as well. a bigger reaction on gold, just coming off these recent highs. that is there a level would push the boj to intervene
for the first time since 2011? we have been talking about it. happens, theyexit lose quite a few percent. he changes policy and he does nothing in the end of rises -- i do feel sorry for him. it is not an easy position but the line in the sand is that it be around that 100 level. go beyond that, i think it will start squeaking. vonnie: it is really only short-term volatility that is elevated. from that that it is only speculators in the market or is there something more guest: it's speculators and volatility. the risk at this time could go
either way. longer-term investors take the position if you look at the way hedging was trading, with sterling holdings as well, that was coming through much earlier and smart money was hedging very early in the year. mark: great to see. see you soon. literally 17 minutes left of the thursday session. much more ahead here on the european close. we are heading to st. petersburg to the international economic own ryanour very chilcote will be talking with the venezuelan oil minister, next. ♪
mark: live from london and new york, i'm mark barton. .onnie: i'm vonnie quin this is the european close. now a look at some of the biggest stories in the news right now. the ford motor company has a big problem after its overhaul. superersions of the f-150 cap fall short of emissions standards. within nine years, the requirements will be tougher to meet. wagon outlined an overhaul strategy as it tries to remove -- tries to move beyond its emissions scandal. carsare focusing electric and right hailing. the carmaker says they will unveil 30 electric vehicles by 2025. two banks in abu dhabi are
exploring eight merger to become the biggest lender in the middle east. neither are commenting. deposits are falling because of lower growth and declines in asset quality. that is your bloomberg business flash for this hour. the 20th annual st. petersburg economic forum kicks off today. our ryan chilcote is live in st. petersburg and has a special guest. the oil are joined by minister of venezuela. he was kind enough at last opec meeting to meet with me here. thank you for joining us. to start with opec. you could argue the rebound we , exceptn oil prices today oil is down a bit, but an 80% rebound since the lows in february means that the saudi strategy they have been championing, letting the market
take care of itself is working. does opec still need to intervene in the markets to boost prices? all of theest: andon we took in january february, we talked with the russians and the president of opec and the minister of qatar and myself and we were able to february and there was a .roposal to freeze -- thehomme meetings most important oil producers in -- [indiscernible]
what happened, like the kuwaiti and the problem, they have taken out of the market more than 3 million barrels. that is a decision that comes to opec, to continue monitoring the and during the summer, predictable and the offer will be in the news by to summer so what is going happen by the end of the summer? price to datethe
compared to last year, there's a deepening of more than $12 a barrel. we want to recover the price to we willer and probably have an increase and there again , there's a producer to meet and work some over. ryan: let's talk about where we are -- $50 a barrel oil, can venezuela survive that and avoid a default? you are talking about the national oil company. barrel, that is more than three times the cost of production. our cost of production is no more than $12 a barrel.
from a point of view, $50 is enough. it's good for our economy. continue the recording of the price, but we continue that we are mentioning in a stable way where we can sustain the level of investment required. ryan: let's talk about the process of getting the oil out of the ground. we have had a hard -- we have heard one service country -- company after another saying they will not deal with venezuela. how hard is that for your production? achieving the skin of the contract.
our cost of production and the purposes of production and the we are working with some of the mayoral services companies. we are going to drill some areas and returned to them and they are going to bugle to withstand the reduction. we can sustain increases in the production using what they themselves are obtaining. that sounds like a production sharing agreement as an interim solution. guest: it is not exactly the same because the control is all
.he time doing a service do inthere is a big bond october or november. will they be able to pay that? guest: we are working to paying that. up until now, it has been the we havepickup of price expenditure and we have the capacity. be willing tou sell some of your refineries in the united dates to make sure you can make those payments? guest: we are using our refineries in the united states
and we are reopening refining in aruba. going to be a big plus for us. for yournk you so much time. that was the venezuelan oil minister talking about how they are making do with the oil price today. mark: great job. the venezuelan oil minister there with ryan chilcote. has beeno look at what happening in the bond market. some amazing stat that there. global government debt has gained 5.5% this year, the most for any comparable time since 1995. is a selection of some of the records -- the german 10 year yield is down to a new record low. it was only a few days ago that
we were above zero but now we are below zero. records in switzerland up to 30 years. day.e: it is a phenomenal butan say it has bounced 5.67%.ld is at gold futures are bouncing. are a bitgold futures of a safe haven flow here, above $1300 an ounce, and that was definite resistance. you are watching bloomberg markets. ♪ get ready for the rio olympic games
london, and mark barton. stocks finishing the session low, but not as low as they were earlier in the day. still, the sixth decline in every single industry group falling. it was another day of volatility. index, europe us fear basically telling us what equity volatility is all about. as you can see from this chart, it is clear what it is all about. sixth day in seven. but now we are, at the highest with equity volatility on the rise because of concerns ahead of next week
off referendum, which has been talked about a great deal by a number of central banks. what is interesting is what is happening in the government bond market with record yields across the board. we see a diversion's in the core and the periphery. the u.k.s ahead of referendum next weekend. differential between the spanish and german 10 year. recentbeen rising in stays and has been rising. we are nowhere near the levels we saw in the sovereign debt crisis when the yield differential between germany and spain hit 6.38%.
we've seen the 10 year ago down to a negative yield, but spanish yields are on the rise. spain has a very big election coming next weekend and the flight to quality, the yield on the 10 year has risen for the eighth consecutive day. that's an amazing run, sending the yield to 1.11%, upping the about whatng again could happen if the u.k. votes to leave the eu next thursday. it is all happening on a macro level. dollar-yen hitting the 103 mark, blowing through 104
which was hit in august of 2014. marketsone indicator of looking for a safe haven. another gauge.e trading, autures little bit of a safe haven trade back down to 3.2%. let's take a look at the broader markets. stocks trading on this growth concerns and janet yellen talking about challenging demographics. the dow jones down about .3% and the s&p 500 down .5% and the nasdaq down .7%. abigail doolittle has more live from midtown manhattan. : we are looking at a bit
of a selloff here -- the index down .7%. when we look at some of the worst performers in the nasdaq 4%. bio marin down nearly a study ing hemophilia patients. but this is not new and was disclosed in april and we have a number of banks all defending the shares nonetheless. they still remain down sharply. american airlines is lower on a downgrade of bank of america merrill lynch, trading on its lowest level. software internet security downgraded to a hold from a buy from deutsche bank, citing weakening demand trends after attending the annual security conference. the downgrade is hitting the stock today. and you have a chart
that is illustrative. abigail: after today's drop, we have the software trading back below the 200 day moving average. that tells a buyers are disagreeing to some degree and the buyers are moving in. the last time this happened with some real umph, the stock dropped as much as 13%, so we may have some softness ahead. both the leave and remain camps have suspended campaigning in the u.k. after a member of parliament was attacked in her district in west yorkshire. the labor mp is in critical condition. the press association reporting she was shot twice. david cameron says on twitter that it is right all campaigning has been stopped after the
terrible attack. i will not go ahead with tonight rally in gibraltar. joining us now is simon kennedy. what do we know about this event? simon: we know very little. she was in her electoral district in the north of england and was shot twice. both sides of the campaign have suspended their activities. attackeray the declared britain first, which is a group that is against stage,tion, but at this we have to say there is no actual link to the referendum. it is just today campaigning has been suspended. it comes at a fraught time in the campaign.
simon: there had been another day of acrimony between the sides and maybe this will be a sobering force for both sides that these things can happen. there have been a lot of political skirmishes with the chancellor of the action -- chancellor of the exchequer was criticized by members of the pro--brexit lobby. accused of scare mongering. it's not like the markets didn't have enough to go on today. the 10 year u.s. yield down at one point today. what do you make of yield going lower? simon: we will have to see the results of that. i was talking to a fund manager
this morning who said these yields have less to do with brexit than one might think. that might actually be a distraction and once it is through, regardless of the concernit represents a about global economic growth and political uncertainty not just in the u.k. that elsewhere. i bumped into ethan harris in the hallway and he said the fed has not lost credibility at all. that is what the market is reflecting. what can we tell from that and will there be a fed interest rate increase at all? night, janet yellen
pivoting a little in public toward the view of larry summers that her folks have had threats ,o the economy and other events yesterday, outlining longer-term and more structural problems the u.s. economy is running into. certainly that makes interest-rate increases less likely this year. polls, the onet we have been following throughout is the number cruncher, the percentage likelihood of a brexit. i think one of the most interesting comments came from the professor of politics at stress clyde who's known for his knowledge on such events. i never would have expected -- i would have said the probabilities remain with the favorite, but we no longer have
a favorite in this referendum. there has to be a possibility that we will vote leave. much with thery leave side, isn't it? was head ofyear, he the exit poll that surprised everyone that should the conservatives having a majority. ,he number crunch on bloomberg insisting helogger was someone who called the general election. curtis talking about having a movement with a great deal of credibility. it carries on, we could have brexit as a favorite. and they are discussing whether david cameron will still be prime minister by the end of
this month. even though we don't know where we will be next friday, certainly a feeling we are walking that way. mark: let's check in on bloomberg first word news with, chandra from the first word news desk. ,: nicolas sarkozy says friend -- says france must take a hard line against terror suspects. in an interview, he says france should immediately expel all foreign nationals or dual citizens with ties to terrorist networks. he says french citizens indulging in such activities should be placed under house arrest. trader hopes rogue a secret recording will back up claims he was not solely responsible for a $5.5 billion loss. played of four judges in his trial today. a former prosecutor in the case says they knew about his trading. the trial will determine how much he owes the bank.
euro 2016 football championships are over for a group of russian fans. 20 of them will be deported after violent at the games. the russian team has been warned it could be kicked out if it's fans do not behave. global news 24 hours a day howard by our 2400 journalists in more than 150 news bureaus around the world. up, it is battle of the chart. my chart tells you everything you need to know. one week until the brexit vote. ♪
vonnie: time now for our global battle of the charts where we look at charts and what they might mean for investors. you can access these charts on the bloomberg. stocks things off is reporter extraordinaire, oliver renick. oliver: this is a chart based on a story out today on bloomberg news basically looking at what is happening with chinese selling of equities. it has been a story in the past year or so about chinese officials selling u.s. treasuries. but what is happening from the equities standpoint, what we have learned is they are selling stocks. the shows the china remnant -- renminbi spot. this decline -- a little notification to remind me to
come up and do the chart. i would move on to mark's chart. the fact that this was largely flat over the past year and you had depreciations in the yuan here and here, we are trying to assess whether they are going beyond the treasury market and selling u.s. equities perhaps offsetting that depreciation a little bit. a lot of selling their. check out the story online. vonnie: i learned something i did not know for. i thought it was really important today to have a snapshot of where the u.k. economy is one week ahead of the referendum, the day the bank of england kept interest rates unchanged and where they have been since march 2009. the bank has a difficult task if the u.k. votes for a brexit.
if exit happens, sterling could fall and that boost inflation. the opinion seems to be that the bank will focus on growth and cut interest rates. 25% probability that bank will cut interest rates at its july meeting. the red line is the base rate right now -- just thinking of growth, the big question is how much is the u.k. economy slowing and how much is its slowing not link to the referendum? bythe first quarter, it grew .4%. i have a dotted line for a reason. , which produces our pmi data says growth right now is growing at a .2% level and a number of policy makers say growth is slowing and we should look at the referendum.
when it comes to growth, let's think about inflation. inflation right now, there isn't really any. we are nowhere near the bank of england's target of 2%. it says it will reach that target in two years time, but if sterling plunges and inflation rises, that could force the bank of england to height rate. say wait for it until 51 months -- that's over four years time. tos is the snapshot you need have about here in the u.k. one week away from the referendum. check out my chart online. vonnie: each part of that chart was fascinating and there are many charts in one. i give you so much kudos for that.
problem with the gdp figures is that they are backward looking. mark, i'm going to call you the winner. is inther day when china the news, i probably would let you in. mark: undone by these sloughs function. still ahead on the european close, volkswagen is the big story today, pulling back the curtain as it tries to recover from the omissions cheating scandal. will drivers return to the automaker? we will discuss next. ♪
this is the european close on bloomberg television. time for a look at some of the biggest stories in the news right now. retail sales in the u k rose more than expected last month, climbing .9%. more weather -- warm weather for summerhe demand clothing and department stores offered sales promotions. largest natural gas explorer is not concerned about a glut that may last another five years. gazpromf executive of says there's plenty of growth in europe and is counting on falling out put to boost its exports and lock in its 30% market share. says it will struggle to meet the goal of delivering more than 58 widebodied jets this year. the problem involves the company that makes the interiors. airbus plans to review the
target at the end of summer. that's the latest bloomberg business flash. the chief executive of volkswagen is laying out his grand vision for the company as it tries to recover from the omissions cheating scandal. this includes a 10 billion euro investment in vehicles like electric vehicles, self driving cars, and right hailing apps. to come up with the money, they will cut costs and streamline its operations. joining us from berlin is matt miller. what do we know about this big strategy overhaul? it seems that investors have been disappointed with what they are hearing today from the volkswagen ceo. shares have been down at one point as much as 3.3% and they did not finish the day at the top of their rally yesterday. shares have come down about 10% awaiting this strategy and they
did not get any lift today. some of the hard numbers folks wagon has given are in return on sales. it plans to boost that by 7% or 8%, not a huge gain. it also plans to put out more electric vehicles, 30 electric vehicles by 2025 and wants them to be about a quarter of total sales by that year. but it doesn't even have one electric vehicle from audi today. that investors are nonplussed. it's going to cost about 10 billion euros to pull. with more thang 16 billion euros in cost to deal with the image and scandal and will spend 10 billion euros to switch to a right hailing, self driving, electric car future tech mobility services company. the one cause they are going to scale back on is research and
development, which oglesby mind. the company says it's going to take its components units and put them into one unit separately. that's what gm did before its bankruptcy. that is pretty run-of-the-mill. has a problem with their f-150, their crown jewel. i saw the story that they reportedly have a problem with their f-150. the idea is because not all the current f-150's meet cafe standards and carbon monoxide standards that they will not be able to sell them anymore. i have a feeling ford will fix the problem before they need to also by the year 2025. about vw and me
getting over the omissions scandal. is this a big step in that direction? matt: if you judge it by how investors sold off shares today, the answer would be no. they still have to come out with a lot of financial details and they say it will take until the end of the year to do that. one thing the ceo has done has put together this plan of 250 big changehich is a from the way they used to do business in a small and tight circle. matt miller in berlin. let's take a quick look at u.s. markets as we head toward the next hour of markets. nasdaq down almost 1%. ♪
kong. >> welcome to bloomberg markets. scarlet: from bloomberg world headquarters in new york, good afternoon. i am scarlet fu. oliver: and i am oliver renick. here's what we are watching -- a ysh for safe havens pushing and gold to the highesten of the year. policymakers echo janet yellen. demand is hot for one job on wall street. bankruptcies are at a six-year high and that is creating a steady stream of business. we will talk to one turnaround expert later in the hour. scart: we are halfway through the u.s. trading day. the s&p 500 is nursing a sixth straight session of losses,